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Undefinitized Contract Action Use, but Management at Local Commands 
Needs Improvement' which was released on January 28, 2010. 

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Report to Congressional Committees: 

United States Government Accountability Office: 
GAO: 

January 2010: 

Defense Contracting: 

DOD Has Enhanced Insight into Undefinitized Contract Action Use, but 
Management at Local Commands Needs Improvement: 

GAO-10-299: 

GAO Highlights: 

Highlights of GAO-10-299, a report to congressional committees. 

Why GAO Did This Study: 

To meet urgent needs, DOD can issue undefinitized contract actions 
(UCA), which authorize contractors to begin work before reaching a 
final agreement on contract terms. Such actions are considered to be a 
risky contract vehicle for the government because contractors lack 
incentives to control costs during this period. Defense regulations 
provide that the government determination of contractors’ allowable 
profit or fee should reflect any reduced cost risk. 

Pursuant to the 2008 National Defense Authorization Act, GAO assessed 
whether DOD actions taken as required by the act have (1) improved 
departmental insight and oversight of UCA use and (2) resulted in 
local commands meeting DOD’s standards for documenting the basis for 
negotiating the contractor profit or fee, definitization timelines, 
and obligation amounts. GAO reviewed relevant DOD regulations and 
policies, and contract files for 83 randomly-selected UCAs totaling 
$6.1 billion at eight local commands. The findings from this contract 
file review can not be generalized across DOD. 

What GAO Found: 

DOD has taken several actions since August 2008 to enhance 
departmental insight into and oversight of UCAs; however data 
limitations hinder its full understanding of the extent to which they 
are used. DOD issued policy that requires centralized, semi-annual 
reporting of undefinitized actions to gain insight in UCA use, 
including information on reason for award, obligation amounts at 
award, and definitization timelines. Over time, reporting requirements 
have evolved as DOD has taken steps to clarify guidance on the types 
of contract actions to be reported. DOD has also required components 
to submit management plans to describe actions taken for improved UCA 
use. Although these actions have helped enhance insight and oversight 
of UCA use, not all UCAs are included in the reports. Of the 24 UCAs 
GAO reviewed that should have been included in the April 2009 semi-
annual report, 8 actions valued at $439 million were unreported by the 
local commands to DOD. 

Implementation of DOD’s recent policies and guidance on the use of 
UCAs has varied at the local commands GAO visited and the associated 
management standards were not fully met. For the 66 UCAs GAO reviewed 
that were eventually definitized, contracting officers generally did 
not document their consideration of cost risk to the contractor during 
the undefinitized period of work as required. In 34 cases, the 
weighted guideline worksheets were not used when required, nor any 
other documentation of how any reduced cost risk during the 
undefinitized period of performance was considered in determining the 
negotiation objective. This was particularly the case for cost-plus-
award fee contracts where defense regulations are not clear about how 
any cost risks are to be considered and documented. Even for the 
remaining 32 cases in which weighted guideline worksheets were used, 
the contracting officers’ basis for risk calculations were often not 
clear due to limitations of the weighted guideline documentation. 
Other management standards were not always met. Only 41 UCAs--about 50 
percent of the actions GAO reviewed—met the 180-day definitization 
requirement. Moreover, 66 of the 83 UCAs GAO reviewed were awarded 
with obligations near or above the 50 percent maximum as shown below. 

Figure: Initial Obligation Amounts for 83 UCAs Reviewed: 

[Refer to PDF for image: vertical bar graph] 

Percentage of not-to-exceed amount obligated at award: 0-25; 
Number of UCAs: 6. 

Percentage of not-to-exceed amount obligated at award: 25-44; 
Number of UCAs: 11. 

Percentage of not-to-exceed amount obligated at award: 45-50; 
Number of UCAs: 53. 

Percentage of not-to-exceed amount obligated at award: 51-75; 
Number of UCAs: 10. 

Percentage of not-to-exceed amount obligated at award: 76-100; 
Number of UCAs: 3. 

Source: GAO analysis of DOD data. 

[End of figure] 

What GAO Recommends: 

GAO recommends that the Secretary of Defense revise defense 
regulations to provide specific guidance for how to develop, consider, 
and document assessments of cost risk for profit or fee for all 
undefinitized contract actions. In written comments, DOD agreed with 
the recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-10-299] or key 
components. For more information, contact John P. Hutton at (202) 512-
4841 or huttonj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

DOD Steps to Enhance Insight and Oversight of UCAs Are Hampered by 
Incomplete Data: 

Local Commands Are Generally Not Meeting DOD's Management Standards: 

Conclusion: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Undefinitized Contract Actions Reviewed: 

Appendix III: Information for UCAs Omitted from DOD's April 2009 Semi- 
Annual Report: 

Appendix IV: Comments from the Department of Defense: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Differences in Local UCA Management Policies: 

Table 2: Definitization Status of UCAs Reviewed: 

Table 3: Categories of Goods and Services Procured with the Contract 
Actions Reviewed at Eight Local Commands, October 2008 through 
February 2009: 

Figures: 

Figure 1: DOD UCA Policy and Associated Guidance: 

Figure 2: Distribution of Assigned Contract-type Risk Factors for 
Definitized Contract Actions Reviewed: 

Figure 3: Obligation Amounts for UCAs Reviewed: 

Abbreviations: 

DFARS: Defense Federal Acquisition Regulation Supplement: 

DOD: Department of Defense: 

FAR: Federal Acquisition Regulation: 

NAVICP: Naval Inventory Control Point: 

NAVSEA: Naval Sea Systems Command: 

OSD: Office of the Secretary of Defense: 

OUSD (AT&L): Office of the Under Secretary of Defense for Acquisition, 
Technology & Logistics: 

TACOM: Tank-automotive and Armaments Command: 

UCA: undefinitized contract action: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

January 28, 2010: 

Congressional Committees: 

To meet urgent needs, the Department of Defense (DOD) can authorize 
contractors to begin work and incur costs before reaching a final 
agreement on the contract terms and conditions--known as an 
undefinitized contract action (UCA).[Footnote 1] This type of 
contract, however, poses risk to the taxpayer as contractors lack 
incentives to control costs while contract terms and conditions are 
negotiated and definitized. UCAs are generally required to be 
definitized within 180 days or before more than 50 percent of the 
estimated contract price is obligated, whichever occurs first. 
[Footnote 2] DOD must ensure that UCAs are used only when necessary 
and that it negotiates the contract terms and conditions as quickly as 
possible. According to defense regulations, since the cost risk to the 
contractor may be low during the undefinitized period, compensation 
should be adjusted to reflect any reduced cost risk. The department 
reported $18 billion in potential obligations for undefinitized 
actions exceeding $5 million, during fiscal year 2008.[Footnote 3] 

In June 2007, we reported that DOD did not know the extent to which it 
was using UCAs and identified the need to improve DOD's (1) oversight 
of UCAs, (2) ability to meet required definitization time frames, and 
(3) contracting officer documentation of the basis for negotiating 
contractor profit or fee.[Footnote 4] In January 2008, these findings 
were reflected in Section 809 of the National Defense Authorization 
Act (NDAA) for fiscal year 2008.[Footnote 5] The act requires DOD to 
issue guidance that would include (1) circumstances in which it is 
appropriate for DOD to use UCAs, (2) procedures for ensuring 
compliance with definitization timelines and obligation amounts, (3) 
procedures for compliance with regulatory limitations on profit or fee 
with respect to costs incurred prior to definitization, and (4) 
reporting requirements for UCAs that fail to meet required timelines 
for definitization or regulatory limitations on the obligation of 
funds or on profit or fee. 

In August 2008, the department issued a policy memorandum on UCA 
oversight and management, which required DOD components to report semi-
annually on contract actions with an estimated value exceeding $5 
million to the Office of the Under Secretary of Defense for 
Acquisition, Technology & Logistics (OUSD (AT&L)), Defense Procurement 
and Acquisition Policy.[Footnote 6] In addition, the memorandum 
advised DOD components to obligate funds for the undefinitized period 
consistent with the contractor's requirements for the anticipated 
undefinitized period and to comply with existing Defense Federal 
Acquisition Regulation Supplement (DFARS) policy on UCA use. The act 
also required us to assess the extent to which DOD's guidance resulted 
in improvements to its insight and use of UCAs. Accordingly, we 
assessed whether actions taken by DOD have (1) improved departmental 
insight and oversight of UCA use; and (2) resulted in local commands 
meeting DOD's UCA management standards for documenting the basis for 
negotiating the contractor profit or fee, definitization time lines 
and obligation percentages, and the circumstances in which UCAs are 
used. 

To identify and assess the actions DOD has taken to improve 
departmental insight and oversight, we reviewed relevant DOD policy 
memoranda, federal and defense acquisition regulations, and proposed 
changes to DFARS; and interviewed senior-level acquisition officials. 
We selected eight local commands and developed and reviewed a random 
selection of 83 contract actions reported as UCAs and valued at a 
total of $6.1 billion. The findings from this contract file review can 
not be generalized across DOD but are illustrative of UCA use. We 
compared information from those contract actions to DOD's semi-annual 
reports and local commands' UCA reports. We selected four of the local 
commands based on their placement within the top 50 percent of the 
total dollar value of UCAs issued over $100,000 during fiscal year 
2008. We selected the remaining four commands based on (1) significant 
UCA use according to the military services, (2) geographic location, 
and (3) the history of UCA use. For the purposes of this report we 
refer to the following eight locations as the local commands. 

U.S. Army: 

* Tank-automotive and Armaments Command Contracting Center, Warren, 
Michigan: 

* Rock Island Contracting Center, Rock Island, Illinois: 

U.S. Navy: 

* Naval Sea Systems Command, Washington, D.C. 

* Naval Inventory Control Point, Philadelphia, Pennsylvania: 

U.S. Air Force: 

* 303rd Aeronautical Systems Wing (Reconnaissance Systems Wing), 
Wright-Patterson Air Force Base, Ohio: 

* 516th Aeronautical Systems Wing (Mobility Systems Wing), Wright- 
Patterson Air Force Base, Ohio: 

Defense Agencies: 

* Missile Defense Agency, Redstone Arsenal, Alabama: 

* United States Special Operations Command, MacDill Air Force Base, 
Florida: 

We selected the 83 UCA contract actions from UCAs reported in the 
Federal Procurement Data System-Next Generation (FPDS-NG) as awarded 
during fiscal year 2008 and the first 5 months of 2009. [Footnote 7] 
We determined that the FPDS-NG data were sufficiently reliable for the 
purposes of this review by comparing the information in FPDS-NG with 
UCA information from other sources, such as the Electronic Data Access 
program, DOD's semi-annual reports, local command reports, and 
information in the contract files.[Footnote 8] 

To determine whether DOD's recent actions have resulted in local 
commands meeting UCA management standards, we reviewed relevant 
policies and guidance to identify the standards for documenting the 
basis for negotiating contractor profit and fee, timeliness of 
definitization, obligation amounts at the time of contract award, and 
the circumstances that justify the use of a UCA. We then reviewed 
contract files for the 83 contract actions in our selection and 
compared the relevant documentation to the management standards. At 
each local command we discussed the circumstances for each UCA with 
contracting officials. 

We conducted this performance audit from March 2009 to January 2010 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. Appendix I 
provides details on our scope and methodology, appendix II lists the 
contract actions we reviewed, and appendix III lists contract actions 
we reviewed that were unreported in DOD's April 2009 semi-annual 
report. 

Background: 

GAO designated DOD contract management as a high-risk area in 1992. 
[Footnote 9] The lack of well-defined requirements, the use of ill-
suited business arrangements, and the lack of an adequate number of 
trained acquisition and contract oversight personnel contribute to 
unmet expectations and schedule delays and place the department at 
risk of potentially paying more than necessary. In fiscal year 2009, 
DOD spent nearly $384 billion on contracts.[Footnote 10] In response 
to our prior recommendations and congressional direction, DOD has 
recently emphasized the need to improve its insight and management of 
UCAs. 

When a requirement needs to be met quickly and there is insufficient 
time to use normal contracting vehicles, defense regulations permit 
the use of an undefinitized contract action. These can be quickly 
entered into, but at a later date, the contract's final price and 
other terms must be agreed upon by the contractor and government, a 
process known as definitizing the contract. UCAs can be entered into 
via different contract vehicles, such as a letter contract (an 
undefinitized stand-alone contract), a task or delivery order issued 
against a pre-established umbrella contract, an order against a basic 
ordering agreement, or a modification for additional supplies or 
services to an existing contract. 

UCAs are considered risky contract vehicles for the government. Our 
prior work and a DOD Inspector General report found that undefinitized 
contracts transfer additional cost and performance risks from 
contractors to the government because contracting officers normally 
reimburse contractors for all allowable costs they incur.[Footnote 11] 
With all allowable costs covered, contractors bear less risk and have 
little incentive to control costs. The government also risks incurring 
unnecessary costs as requirements may change before the contract is 
definitized. Contractors and the government should bear an equitable 
share of contract cost risk.[Footnote 12] UCAs shift much of the 
burden of cost risk onto the government during the undefinitized 
portion of the contract. Because the cost risk to the contractor may 
be reduced during this undefinitized period, compensation should be 
priced accordingly and negotiations should reflect any reduced cost 
risk to the contractor in determining the government's profit or fee 
objective, according to defense regulations.[Footnote 13] 

DOD's acquisition organization consists of several levels including 
department, service or agency, and local contracting commands or 
activities where acquisition policy and oversight take place. At the 
departmental level, the Under Secretary of Defense for Acquisition, 
Technology and Logistics is responsible for supervising and 
establishing policy for all DOD matters relating to procurement and 
acquisition policy through the Office of Defense Procurement and 
Acquisition Policy. At the component or agency level, each military 
service has its own senior acquisition executives and acquisition 
offices that are to establish contracting policies and conduct 
oversight of the local contracting commands or activities for each 
service. The defense agencies and combatant commands, such as the 
Missile Defense Agency and the U.S. Special Operations Command, also 
have procurement or contracting directorates within their organization 
that are to perform similar functions as the service senior 
acquisition executives in terms of establishing policy and conducting 
oversight. Within each military service there are numerous local 
contracting commands or activities that provide contracting support to 
many service acquisition and operational commands. 

DOD Steps to Enhance Insight and Oversight of UCAs: 

Are Hampered by Incomplete Data: 

DOD has taken a number of steps aimed at enhancing its insight into 
and oversight of UCA use among the components and local commands; 
however, data limitations hinder its full understanding of the extent 
to which UCAs are used. DOD implemented a policy in August 2008 to 
require centralized periodic reporting of UCA information and related 
management plans to the Defense Procurement and Acquisition Policy 
office within OUSD (AT&L). The department's reporting requirements 
have evolved over time to include other types of contract actions that 
should be reported and DOD has instituted contract peer reviews for 
contracts above $1 billion, which may include UCAs. Although these 
steps have helped increase insight into UCA use, information gaps 
remain. For instance, we found DOD's centralized reporting did not 
include 8 of 24 UCAs we reviewed that should have been reported in the 
April 2009 semi-annual report. 

DOD Has Implemented Policies and Proposed Changes to Enhance UCA 
Insight and Oversight: 

DOD has instituted policies and proposed additional changes intended 
to enhance its departmental insight and oversight of UCA use. See 
Figure 1 for the recent changes to policies and guidance intended to 
increase insight and oversight of the use of UCAs. 

Figure 1: DOD UCA Policy and Associated Guidance: 

[Refer to PDF for image: list] 

August 2008 Policy Memorandum: 

* Consolidated UCA Management Report: 
- Semi-annual reporting for UCAs above $5 million; 
* UCA Management Plans: 
- Semi-annual plans submitted by components; 
* UCA reporting format established. 

DFARS: 

* DFARS Section 217.74: 
- Updated in July 2009 to codify August 2008 policy; 
* DFARS Section 201.170: 
- Peer review of contracts above $1 billion. 

October 2009 Policy, Guidance, and Instructions: 

* Contract actions exempt from DFARS requirements related to 
definitization schedules and initial obligation amounts should be 
reported; 
* Formalized template to report key information including: 
- award, definitization, and receipt of qualifying proposal dates; 
- not-to-exceed and obligation amounts; 
- reason for award. 

Source: GAO analysis of DOD information. 

[End of figure] 

DOD's August 2008 policy memorandum established centralized semi-
annual reporting for UCAs with a not-to-exceed price above $5 million 
to the OUSD (AT&L) Defense Procurement and Acquisition Policy. 
According to DOD, the purpose of this centralized reporting is to 
enhance departmental insight into and management of UCAs. Starting 
October 31, 2008, undefinitized contract actions were required to be 
reported if the contract action's not-to-exceed value was above $5 
million and it was undefinitized at any point during a 6-month 
reporting period--either April through September, or October through 
March. These semi-annual reports are to include data on the reason for 
award, not-to-exceed amounts, obligation amounts, date of scheduled 
definitization, days past definitization deadline, and date the 
qualifying proposal is received. DOD finalized its October 2009 semi-
annual report December 22, 2009. 

In addition to semi-annual reporting, the August 2008 policy 
memorandum also required each DOD component to update and submit a UCA 
management plan, each April and October, along with the semi-annual 
report as a way to improve oversight of UCA use. These management 
plans are required to describe the actions taken by DOD components to 
help ensure: 

* appropriate use, 

* timely definitization, 

* minimum obligation at time of award (consistent with the 
contractor's requirements for the undefinitized period), 

* appropriate recognition and documentation of the contractor's 
reduced risk during the undefinitized period in the profit and fee 
negotiations, and: 

* milestones for completing planned actions. 

In October 2009, DOD updated its detailed guidance to clarify that 
UCAs to be recorded in the semi-annual report include undefinitized 
contracts awarded for foreign military sales, congressionally mandated 
long-lead procurement items, initial spares, special access programs, 
and contingency operations. A Defense Procurement and Acquisition 
Policy official also told us that once UCAs over $100 million are 
definitized, components must also submit the weighted guidelines 
worksheets along with their semi-annual report. Weighted guideline 
worksheets are an organized and structured approach to establish and 
document a prenegotiation objective for profit or fee based on an 
assessment of contractor risk. In preparing government estimates where 
profit is negotiated as an element of price, a reasonable profit shall 
be negotiated or determined for each procurement action, according to 
defense regulations. Requiring the worksheets to be submitted is 
intended to provide departmental insight into whether or not 
contracting officers are documenting their assessment of the 
contractor's reduced risk when determining profit or fee negotiation 
objectives. Although we were told that weighted guidelines are to be 
submitted for UCAs over $100 million once definitized, we could not 
find documentation of this requirement in the UCA management 
Procedures, Guidance, and Instructions. On December 23, 2009, the 
department revised DFARS procedures, guidance, and instruction to 
require military departments and defense agencies to submit, with 
their semi-annual reports, a copy of the record of weighted guidelines 
for each definitized UCA with a value of $100 million or more. 

DOD also has finalized one amendment to DFARS and has proposed two 
additional changes which will affect how UCAs are managed within DOD. 
In July 2009, DFARS was amended to codify the changes communicated in 
the August 2008 policy memorandum. Also, in July 2009, DOD proposed a 
change to clarify that the existing DFARS requirement that letter 
contracts be definitized within 180 days or before more than 50 
percent of the not-to-exceed amount is obligated will apply rather 
than Federal Acquisition Regulation (FAR) policy.[Footnote 14] 
Finally, although unpriced change orders are not UCAs, DOD has 
proposed a change to DFARS in recognition of the need for increased 
insight into and oversight of unpriced change orders to require that 
unpriced change orders be managed and overseen in a manner consistent 
with UCAs.[Footnote 15] 

DOD's recent peer review process initiative may also improve DOD's 
insight into and oversight of UCAs. Under the peer review process, 
contracts above $1 billion are to be reviewed by senior DOD officials 
at three points prior to contract award and then periodic post-award 
reviews. This peer review process is intended to increase departmental 
awareness of the significant events occurring with contracts valued at 
$1 billion or more across DOD.[Footnote 16] According to a DOD 
official, at least one UCA contract has been selected as part of the 
peer review process. 

Centralized Reporting Is Incomplete: 

Despite DOD's efforts to collect information on UCAs, not all UCAs 
were in the most recent semi-annual report. For example, we found that 
of the 83 contract actions we reviewed, 24 met DOD's criteria for 
being included in the April 2009 semi-annual report--those contracts 
that exceeded $5 million between October 1, 2008, and March 31, 2009. 
However, only 16 of them were actually reported in April 2009, leaving 
8 contract actions valued at $439 million unreported.[Footnote 17] For 
example, because the Naval Sea Systems Command's (NAVSEA) local list 
of undefinitized actions was not complete, the local command was not 
aware it missed four UCAs valued at $153 million in its submission to 
the Defense Procurement and Acquisition Policy office for the April 
2009 semi-annual report. Also, at the Tank-automotive and Armaments 
Command (TACOM), we reviewed 4 undefinitized actions valued at $286 
million that were not included in the semi-annual report. According to 
TACOM officials, 2 actions valued at $271 million went unreported 
because local officials did not report actions that were definitized 
during the reporting period despite DOD's requirements to include 
them. The other 2 contract actions, valued at $15 million, were 
overlooked. In contrast, all of the 16 contract actions in our 
selection at the U.S. Special Operations Command and the Army's Rock 
Island Contracting Center were included in local reports and reported 
to DOD for the April 2009 semi-annual report as required. 

DOD's reporting requirements are still in flux as it takes steps to 
gain insight into and oversight of UCA use. For example, when DOD 
introduced the new reporting requirements in its August 2008 policy 
memorandum, UCAs over $5 million were required to be reported, but 
there was some confusion at the local commands as to what type of 
contract action this requirement applied. DOD released detailed 
guidance to commands for their use in time for the October 2009 report 
specifying that contract actions exempt from definitization and 
obligation limitations, such as foreign military sales and long-lead 
procurement items, were to be included in the semi-annual report. In 
addition, the proposed July 2009 amendment to DFARS is intended to 
increase DOD's insight of unpriced change orders by requiring these 
contract actions to be reported semi-annually and managed in a manner 
consistent with UCAs. According to DOD, unpriced change orders pose 
similar risks as UCAs, therefore, increased insight and oversight are 
warranted. While reporting of unpriced change orders is not yet 
required, we identified nine unpriced change orders, within the 83 
contract actions we reviewed, with a not-to-exceed value totaling $499 
million, which would fit DOD's proposed reporting criteria. Five of 
these--totaling $231 million--at the Aeronautical Systems Center are 
being tracked locally similarly to UCAs with regard to approval, 
obligation, and definitization requirements, but these were not 
included in DOD's semi-annual reporting. Another unpriced change order 
awarded by the Missile Defense Agency for $14 million is also tracked 
according to local command policies but was not included in DOD semi- 
annual reporting. In contrast, we found three unpriced change orders, 
totaling $254 million at the Rock Island Contracting Center, that were 
tracked similarly to UCAs at the local level and reported to DOD. 

Notwithstanding the inaccurate data and evolving refinement of UCA 
reporting requirements, DOD has begun to use its semi-annual UCA 
report to oversee the extent to which local commands are using UCAs. 
For example, based on increased use reported in the April 2009 semi-
annual report, the Director, Defense Procurement and Acquisition 
Policy, visited the Aeronautical Systems Center in September 2009 to 
better understand the situation there, reemphasize the importance of 
UCA management, and discuss ideas for how the contracting center can 
improve. 

Local Commands Are Generally Not Meeting DOD's Management Standards: 

Despite DOD's recent UCA management policy, guidance, and instructions 
designed to improve their use, implementation varied at local commands 
we visited and the management policy standards were not fully met. 
DOD's August 2008 policy designed to improve UCA management 
reemphasized requirements governing their use, including: 

* allowable profit during the undefinitized period when determining 
the government's objective for profit or fee, 

* documenting any reduced cost risk and profit or fee determinations 
in the contract file, 

* definitization time frames, and: 

* obligation limits. 

For 66 of the 83 UCAs we reviewed that were definitized, contracting 
officers generally did not document the profit or fee negotiation 
objective or consideration of reduced cost risk to the contractor 
during the undefinitized period of work as required.[Footnote 18] In 
addition, the 180-day requirement for UCA definitization was not met 
in half the UCAs we reviewed. Furthermore, despite DOD policy to limit 
obligations to the planned work during the anticipated undefinitized 
period, the local commands typically obligated at or near the maximum 
amount permitted--up to 50 percent of the not-to-exceed amount-- 
immediately at award of UCAs.[Footnote 19] Despite the risks involved, 
we also found situations when the government may have been able to 
avoid the use of undefinitized contract actions. 

Commands Varied in How They Implemented DOD's Policy Designed to 
Improve UCA Management: 

The local commands we visited managed their UCA use to varying 
degrees. All of the locations used some sort of local management 
report to track information about the contracts awarded. A majority of 
the locations reported UCA awards and status to local acquisition 
management regularly ranging from weekly to monthly. Local commands 
also varied in the dollar threshold amounts requiring higher-level 
approval, such as the head of contracting authority rather than a 
division chief or department head, for their use of UCAs. For example, 
the Rock Island Contracting Center, TACOM Contracting Center, U.S. 
Special Operations Command, and Missile Defense Agency require 
management approval at the highest-level, i.e, the head of contracting 
activity, within the command for all UCAs regardless of price, while 
other commands only require management approval at the highest level 
for UCAs above a $10 million threshold. 

The local commands we visited also emphasized key aspects of UCA 
management standards to varying degrees. Some commands appear to have 
increased their focus in one of the areas identified in the August 
2008 policy. For example, the Rock Island Contracting Center has 
decreased the 180-day requirement for definitization to 150 days. 
According to local command officials, if 150 days from UCA award is 
surpassed, management expects continuous updates on the status of 
definitization. Table 1 compares UCA management policies for the 
commands we visited. 

Table 1: Differences in Local UCA Management Policies: 

Local command: 303[RD] Aeronautical Systems Wing; 
Local command reporting requirement: Weekly: [Check]; 
Local command reporting requirement: Monthly: [Check]; 
Local command reporting requirement: Highest level contracting 
official approval required for all UCAs [A]: [Empty]; 
Planned definitization schedule under 180 days: [Empty]. 

Local command: 516[TH] Aeronautical Systems Wing; 
Local command reporting requirement: Weekly: [Check]; 
Local command reporting requirement: Monthly: [Check]; 
Local command reporting requirement: Highest level contracting 
official approval required for all UCAs [A]: [Empty]; 
Planned definitization schedule under 180 days: [Empty]. 

Local command: Rock Island Contracting Center; 
Local command reporting requirement: Weekly: [Check]; 
Local command reporting requirement: Monthly: [Check]; 
Local command reporting requirement: Highest level contracting 
official approval required for all UCAs [A]: [Empty]; 
Planned definitization schedule under 180 days: [Check]. 

Local command: TACOM Contracting Center; 
Local command reporting requirement: Weekly: [Empty]; 
Local command reporting requirement: Monthly: [Check]; 
Local command reporting requirement: Highest level contracting 
official approval required for all UCAs [A]: [Check]; 
Planned definitization schedule under 180 days: [Empty]. 

Local command: Naval Inventory Control Point; 
Local command reporting requirement: Weekly: [Check]; 
Local command reporting requirement: Monthly: [Empty]; 
Local command reporting requirement: Highest level contracting 
official approval required for all UCAs [A]: [Empty]; 
Planned definitization schedule under 180 days: [Empty]. 

Local command: Naval Sea Systems Command; 
Local command reporting requirement: Weekly: [Check]; 
Local command reporting requirement: Monthly: [Empty]; 
Local command reporting requirement: Highest level contracting 
official approval required for all UCAs [A]: [Empty]; 
Planned definitization schedule under 180 days: [Empty]. 

Local command: U.S. Special Operations Command; 
Local command reporting requirement: Weekly: [Check]; 
Local command reporting requirement: Monthly: [Check]; 
Local command reporting requirement: Highest level contracting 
official approval required for all UCAs [A]: [Check]; 
Planned definitization schedule under 180 days: [Empty]. 

Local command: Missile Defense Agency [B]; 
Local command reporting requirement: Weekly: [Empty]; 
Local command reporting requirement: Monthly: [Check]; 
Local command reporting requirement: Highest level contracting 
official approval required for all UCAs [A]: [Check]; 
Planned definitization schedule under 180 days: [Empty]. 

Source: GAO analysis of local contracting command UCA management 
policies. 

[A] All undefinitized contract actions require management approval. 
However, some commands authorize lower level management officials, 
such as division chiefs or department heads, to approve use of 
undefinitized contract actions under $10 million. 

[B] Missile Defense Agency requires biweekly and monthly reporting. 

[End of table] 

Mandatory Consideration of Incurred Cost Prior to Contract 
Definitization Is Not Typically Documented in the Contract File: 

According to DOD regulations, contracting officers are required to 
consider any reduced cost risk to the contractor for costs incurred 
before negotiation of the final price. Further, contracting officers 
must document this risk assessment in the contract files. Sixty-six of 
the 83 contract actions we reviewed were definitized and should have 
documented a risk assessment in their contract file and used the 
weighted guideline worksheet or an alternative method to determine 
allowable profit or fee for negotiation purposes.[Footnote 20] 

About half of the cases we reviewed--34 of 66--did not use the 
weighted guidelines or document any consideration of cost risk to the 
contractor during the undefinitized period when establishing profit or 
fee negotiation objectives. Instead, we found these contracting 
officers based their profit or fee negotiation objectives on 
previously negotiated rates under contracts for similar work or other 
factors. None of these included the required consideration of any 
reduced cost risk to determine whether the contractor's proposal 
included fair and reasonable prices. For example, in 12 cost-plus-
award-fee contract actions, the contracting officers used the base and 
award fee structure in contracts previously awarded for similar work, 
or in one case, accepted the contractor's proposal when determining 
their negotiation fee objectives prior to contract definitization. 
However, DOD's contract pricing reference guide notes that 
automatically applying predetermined profit or fee percentages without 
regard to the unique circumstances of the immediate negotiation is 
inconsistent with government profit or fee goals. Although not 
required to use a weighted guidelines worksheet for cost-plus-award-
fee contracts, contracting officers are still required to consider and 
document any reduced cost risk borne by the contractor during the 
undefinitized period.[Footnote 21] For these contract actions we did 
not see evidence in the contract file that there was consideration of 
any reduced cost risk. However, in one case a contracting officer was 
aware of the requirement to document and consider reduced cost risk, 
but did not know how to account for any reduced cost risk because 
defense regulations do not provide a procedure for how to consider any 
reduced cost risk for cost-plus-award-fee type contracts. 

In the remaining 32 of 66 UCAs we reviewed, the contract files 
included weighted guideline worksheets, but it was not always clear 
whether the contracting officers considered any reduced cost risk to 
the contractor during the undefinitized period as a factor when 
determining allowable profit or fee as required.[Footnote 22] Because 
of the weighted guideline worksheet design it did not show the 
contracting officer's basis for risk calculations or indicate the 
reason for assigning a particular contract-type risk value. The 
contract-type risk value reflects the relative risk to the government 
associated with the specific contracting method. Therefore, we also 
reviewed the contract files for documentation of a risk assessment. In 
15 of these 32 contract files, we found no risk assessment 
documentation in the file that provided a rationale for the values 
assigned to the contract-type risk in the weighted guidelines 
worksheet, making it difficult to verify what consideration, if any, 
the contracting officer made for incurred costs. In addition, within 
these 15 files the contracting officers did not acknowledge the 
requirement to ensure that the profit or fee negotiation objectives 
reflected any reduced cost risks to the contractor. 

In the remaining 17 of the 32 contract files, the contracting 
officers' rationale for their decisions on the assigned contract-type 
risk value and, when applicable, their consideration of incurred costs 
during the undefinitized period, were documented in the contract file. 
Contracting officers are required to use the contract-type risk value 
in the weighted guidelines worksheet to reflect any reduced contractor 
cost risk during the undefinitized period. A higher contract-type risk 
value represents a higher risk to the contractor. For example, a 
contracting officer may assign a fixed-price type contract a value 
ranging from zero to six, while a cost-plus type contract will range 
from zero to two.[Footnote 23] If costs have been incurred prior to 
definitization, the contracting officer should account for the shift 
in risk from the government to the contractor by assigning a contract-
type risk value that is typically lower than the normal range. 
According to the department's August 2008 UCA policy, contracting 
officers should generally regard the contract-type risk to be in the 
low end of the designated range when costs have been incurred prior to 
definitization.[Footnote 24] Further, if a substantial portion of the 
cost has been incurred prior to definitization, contracting officers 
may assign a value as low as zero, regardless of contract-type. 

In 8 of these 17 contracts, contracting officers reduced the allowable 
profit or fee negotiation objectives based on costs incurred by the 
contractor during the undefinitized period. For example, in a firm- 
fixed-price UCA awarded by the Navy for compact solid state antennas, 
the contracting officer used the weighted guidelines worksheet to 
assign low contract-type risk values based upon incurred and projected 
costs resulting in a lower profit objective than normal values would 
have calculated. In the remaining 9 cases, the contracting officers 
considered making an adjustment but indicated a reduction to the 
contractor profit or fee negotiation objectives was not warranted. For 
example, in a cost-plus-incentive-fee UCA awarded by the Air Force to 
develop and test a Global Hawk sensor package, the contracting officer 
acknowledged the requirement to consider any reduced cost risk to the 
contractor during the undefinitized period, but determined the 
government shared responsibility for the definitization delay. 
Therefore, the contracting officer assigned a normal contract-type 
risk value for this contract. 

Despite DOD policy guidance, our analysis of the 32 UCAs that used the 
weighted guideline worksheets indicated that the contract-type risk 
factors were skewed toward the middle and high end of the DFARS 
designated ranges, indicating higher risk for the contractors. In the 
absence of documentation of the contracting officers' analysis, we 
were unable to determine why the contract risk types were arrayed 
toward the middle and high end of the designated ranges. Our analysis 
indicated that contracting officers tended to assign middle and high 
values for fixed-price contracts rather than cost reimbursement 
contracts. Figure 2 shows the distribution of the contract-type risk 
values assigned for those UCA contract files containing weighted 
guideline worksheets. 

Figure 2: Distribution of Assigned Contract-type Risk Factors for 
Definitized Contract Actions Reviewed: 

[Refer to PDF for image: stacked vertical bar graph] 

Assigned contract-type risk factor relative to DFARS designated range: 

Below range: 
Cost plus: 0; 
Fixed price: 2. 

Low end of range: 
Cost plus: 2; 
Fixed price: 2. 

Midrange: 
Cost plus: 8; 
Fixed price: 10. 

High end of range: 
Cost plus: 2; 
Fixed price: 6. 

Source: GAO analysis of DOD data. 

[End of figure] 

UCAs Were Not Definitized within Required Time Frames: 

Local commands we visited did not meet the 180-day requirement in the 
federal and defense regulations for 51 percent of the UCAs we 
reviewed. We have previously reported that this situation places the 
government at risk of paying increased costs, thus potentially wasting 
taxpayers' money.[Footnote 25] Table 2 shows the number and percentage 
of UCAs we reviewed that were not definitized within the 180-day 
requirement. 

Table 2: Definitization Status of UCAs Reviewed: 

Component: Army; 
Definitized within 180 days: 23; 
Definitized beyond 180 days: 6; 
Undefinitized beyond 180 days: 0; 
Total: 29; 
Percentage of UCAs not definitized within 180 days: 21%. 

Component: Air Force; 
Definitized within 180 days: 8; 
Definitized beyond 180 days: 10; 
Undefinitized beyond 180 days: 7; 
Total: 25; 
Percentage of UCAs not definitized within 180 days: 68%. 

Component: Navy; 
Definitized within 180 days: 4; 
Definitized beyond 180 days: 4; 
Undefinitized beyond 180 days: 10; 
Total: 18; 
Percentage of UCAs not definitized within 180 days: 78%. 

Component: USSOCOM; 
Definitized within 180 days: 2; 
Definitized beyond 180 days: 3; 
Undefinitized beyond 180 days: 1; 
Total: 6; 
Percentage of UCAs not definitized within 180 days: 67%. 

Component: MDA; 
Definitized within 180 days: 4; 
Definitized beyond 180 days: 1; 
Undefinitized beyond 180 days: 0; 
Total: 5; 
Percentage of UCAs not definitized within 180 days: 20%. 

Component: Totals; 
Definitized within 180 days: 41; 
Definitized beyond 180 days: 24; 
Undefinitized beyond 180 days: 18; 
Total: 83; 
Percentage of UCAs not definitized within 180 days: 51%. 

Source: GAO analysis of DOD data. 

Note: Information in the table was collected during our on-site 
contract file reviews from June 2009 through October 2009. Those UCAs 
we found to be undefinitized beyond 180 days may have subsequently 
been definitized after our file review. 

[End of table] 

We found 24 contract actions that took more than 180 days to be 
definitized, including 4 that took over a year. The longest took over 
582 days to definitize. We also found 18 contract actions that were 
undefinitized beyond 180 days, including one from the Aeronautical 
Systems Center awarded in February 2008, which as of December 2009 had 
yet to be definitized after more than 645 days. Officials at the local 
commands stated that they attempt to follow defense acquisition 
requirements for definitization within 180 days. However, we found 
increased management emphasis on definitization time frames at the 
Rock Island Contracting Center. Specifically, the Rock Island 
Contracting Center focused on definitizing UCAs within 150 days. Of 
the 12 UCAs we reviewed at this location, 11 were definitized within 
the 180-day time frame. We found no relationship between the dollar 
value of the contract action and the length of time it took to 
definitize. Likewise, final contract-type did not appear to influence 
the timeliness of definitization. We found both fixed-price and cost-
reimbursable contracts that exceeded the 180-day definitization 
requirement. 

Contracting officers cited several reasons why UCAs may not be 
definitized within the 180-day time frame. The most common reasons 
cited were problems with contractor and subcontractor proposals, 
protracted negotiations between the government and contractor, 
timeliness of government audits, and unstable requirements and 
funding. Several contracting officers told us that delays were the 
result of a combination of these issues. 

The Majority of UCAs Were Awarded with Maximum Obligation Allowed at 
the Time of Award: 

Most of the contract actions we reviewed were awarded at or near the 
maximum not-to-exceed price authorized under DFARS.[Footnote 26] Of 
the 83 UCAs we reviewed, 66 had initial obligation amounts of 45 
percent or more of the not-to-exceed price at award. As we have noted 
in prior work, contractors may have little incentive to quickly submit 
proposals and agencies have little incentive to demand their prompt 
submission, since funds are available to proceed with the work. 
[Footnote 27] Of the 66 actions that obligated near 50 percent of the 
not-to-exceed price, 34--52 percent--exceeded the 180-day time frame 
for definitization. By limiting the amount of funding obligated at 
award to reflect contractors' requirements during the anticipated 
undefinitized period, the contractor may be incentivized to work with 
the government to submit proposals quickly and enter negotiations 
sooner, potentially saving the government money. 

Contracting officers at each of the eight commands we visited told us 
that it was standard practice to obligate at or near the maximum funds 
allowed when issuing the UCA. At one command we visited, one 
contracting officer told us that obligating at 50 percent has become 
force of habit and noted that contractors have come to expect the 
maximum allowed at award. Some commands have issued guidance on 
assessing the contractor's requirement during the anticipated 
undefinitized period. For example, the Aeronautical Systems Center 
issued guidance in July 2008 instructing contracting officers to only 
obligate the percentage of funds needed by the contractor during the 
undefinitized period. At the Aeronautical Systems Center, 17 of the 25 
contract actions we reviewed initially obligated 45 percent or more at 
award--totaling more than $335 million--including 2 with 100 percent 
of funds obligated at award.[Footnote 28] At the Missile Defense 
Agency, contracting officers told us they are encouraged by the 
Director of Acquisition to obligate only what is needed during the 
undefinitized period; however, formal instructions implementing this 
policy have not been issued. Three of 5 UCAs we reviewed at the 
Missile Defense Agency were obligated with 45 percent or more at 
award--totaling almost $18 million--1 of which was obligated at 100 
percent. Figure 3 shows the distribution of the initial obligation 
percentages of the not-to-exceed amounts for the UCAs we reviewed. 

Figure 3: Obligation Amounts for UCAs Reviewed: 

[Refer to PDF for image: vertical bar graph] 

Percentage of not-to-exceed amount obligated at award: 0-25; 
Number of UCAs: 6. 

Percentage of not-to-exceed amount obligated at award: 25-44; 
Number of UCAs: 11. 

Percentage of not-to-exceed amount obligated at award: 45-50; 
Number of UCAs: 53. 

Percentage of not-to-exceed amount obligated at award: 51-75; 
Number of UCAs: 10. 

Percentage of not-to-exceed amount obligated at award: 76-100; 
Number of UCAs: 3. 

Source: GAO analysis of DOD data. 

[End of figure] 

Although contracting officers are authorized to obligate up to 50 
percent or more at award, we found instances where it may not have 
been necessary. For example, an Aeronautical Systems Center UCA for 
aircraft modernization kits obligated 50 percent at award. However, 
the contractor only incurred costs equal to 2.4 percent of the not-to- 
exceed amount during the 13-month undefinitized period. At the same 
command, a UCA to procure ground control stations for unmanned 
aircraft was given approval to obligate 100 percent at award due to 
the fact this equipment was required for contingency operations. 
However, the contractor incurred costs of only slightly more than 1 
percent of the not-to-exceed amount during the 11-month undefinitized 
period. Given the low amount of incurred costs during the anticipated 
undefinitized period, obligating at or above 50 percent may encourage 
extended periods of performance prior to definitization. 

UCAs Used to Purchase a Range of Goods and Services but Some Use May 
Have Been Avoided: 

The UCAs we reviewed were used to fill a variety of goods and services 
needs, from providing immediate support to the warfighter in theater 
to procuring long-lead items to keep weapon system program schedules 
on time. In several cases UCAs were used to prevent a lapse in service 
or allow for equipment used in contingency operations to be upgraded. 
In one example, the Navy issued a UCA to fund an engineering study on 
spares and repair parts to prevent the grounding of helicopters. In 
another, the U.S. Special Operations Command used a UCA to expand the 
ammunition capacity and add ballistic protective armor on vehicles 
already in theater. In yet another example, the Army issued a UCA to 
create a forward-deployed water packaging system capable of producing 
7,000 bottles of water per day. 

The majority of UCAs we reviewed--64 percent--were used to purchase 
goods. Examples of goods acquired with UCAs include: 

* UCA awarded by Rock Island Contracting Center to fill ammunition 
shortages for the F-15, F-16, F/A-18, and AH-1 Cobra aircraft; 

* UCA awarded by NAVSEA to procure five compact solid state antennas 
to support the Marine Corp's and the Army's ground-based network radar 
system; and: 

* UCA awarded by the U.S. Special Operations Command to procure a 
small armored vehicle to increase survivability, and guard forces with 
increased protection. 

The other UCAs we reviewed--36 percent--were used to purchase 
services. Examples of services acquired with UCAs include: 

* UCA awarded by the Rock Island Contracting Center for basic life 
support services (e.g., camps, dining facilities, waste, water, other 
services/utilities) necessary to support the Logistics Civil 
Augmentation Program in Iraq; 

* UCA awarded by TACOM for the design, development, and fabrication of 
a rocket-propelled grenade active protection system for integration 
onto the mine-resistant ambush-protected vehicle; and: 

* UCA awarded by the Air Force Aeronautical Systems Center to provide 
contract logistics support for unmanned aerial systems efforts known 
as Predator/Reaper. 

Table 3 provides a list of categories of goods and services, as 
reported in FPDS-NG, procured with UCAs at the eight local commands we 
visited. 

Table 3: Categories of Goods and Services Procured with the Contract 
Actions Reviewed at Eight Local Commands, October 2008 through 
February 2009: 

Supplies, equipment, and services codes: Research & development; 
Not-to-exceed amount: $4,642,002,079.00; 
Percentage of total: 68.40%. 

Supplies, equipment, and services codes: Professional, administrative, 
and management support services; 
Not-to-exceed amount: $634,412,427.82; 
Percentage of total: 9.35%. 

Supplies, equipment, and services codes: Aircraft and airframe 
structural components; 
Not-to-exceed amount: $421,031,453.20; 
Percentage of total: 6.20%. 

Supplies, equipment, and services codes: Ground effect vehicles, motor 
vehicles, trailers and cycles; 
Not-to-exceed amount: $369,459,721.74; 
Percentage of total: 5.44%. 

Supplies, equipment, and services codes: Communication, detection, and 
coherent radiation equipment; 
Not-to-exceed amount: $275,766,796.00; 
Percentage of total: 4.06%. 

Supplies, equipment, and services codes: Ammunition and explosives; 
Not-to-exceed amount: $123,282,074.00; 
Percentage of total: 1.82%. 

Supplies, equipment, and services codes: Vehicular equipment 
components; 
Not-to-exceed amount: $98,476,002.33; 
Percentage of total: 1.45%. 

Supplies, equipment, and services codes: Other goods; 
Not-to-exceed amount: $138,549,210.45; 
Percentage of total: 2.04%. 

Supplies, equipment, and services codes: Other services; 
Not-to-exceed amount: $83,180,815.00; 
Percentage of total: 1.23%. 

Supplies, equipment, and services codes: Total; 
Not-to-exceed amount: $6,786,160,579.54; 
Percentage of total: 100.00%. 

Source: FPDS-NG and GAO analysis of DOD data. 

[End of table] 

According to DFARS, UCAs should only be used when the negotiation of a 
definitized contract is not possible to meet government requirements 
and the government's interest demands the contractor be given a 
binding commitment so contract performance can begin immediately. For 
the 83 files we reviewed, it appeared that the use of a UCA may have 
been avoided in some cases. In one example, the Air Force awarded a 
UCA for $54.9 million in April 2008 for an upgrade to the Global Hawk 
program that was necessary to meet the September 30, 2008, initial 
operational test and evaluation deadline. However, as of November 
2009, the Global Hawk program had yet to undergo that testing and 
evaluation process due to other program delays. In another example, 
the Army justification for awarding a UCA for almost $50 million was 
to reevaluate a contractor who was determined to be performing poorly. 
It was determined that rather than using provisions in the existing 
contract allowing for an extension of services, it would be best if 
the contract was extended for a 6-month review period using a UCA, a 
contracting tool that is to be used only when time does not permit the 
negotiation of a contract action and contractor performance must begin 
immediately to meet the government's requirements. 

Conclusion: 

Undefinitized contract actions can be an important tool for DOD to 
meet urgent contracting needs. However, when UCAs are used the 
government bears the majority of the cost risk during the 
undefinitized period. DOD has issued new policies and guidance and now 
requires components to report semi-annually on UCA use as well as 
submit updated management plans detailing actions taken to ensure 
appropriate use. Such efforts are intended to enable better 
departmental insight into the extent to which UCAs are used and how to 
manage their use to minimize the risk to the government. While DOD's 
recent actions are a positive step and are still evolving, clear 
guidance and accurate reporting are key. Further, despite DOD's call 
for increased management attention of UCA use at DOD components, 
management standards and tools designed to help mitigate UCA-related 
cost risk have not always been met or used. Weighted guideline 
worksheets, a tool designed to help contracting officers determine 
allowable profit or fee for negotiation purposes, have not been used 
consistently or included with information for the semi-annual report 
as required. When guidelines have been used, it was not always clear 
whether contracting officers considered any reduced risk to the 
contractor during the undefinitized period because the required 
weighted guideline worksheet documentation, as designed, does not show 
the calculation and basis for any reduced profit or fee. Also, in 
instances when cost-plus-award-fee contracts were awarded and weighted 
guidelines were not required, guidance was not clear as to how to 
consider and document any reduced risk borne by the contractor during 
the undefinitized period. DOD's sustained attention on strengthening 
its reporting and insight into the extent UCAs are used and ensuring 
UCA management is improved at the component level is essential to 
minimizing the government's risk of paying unnecessary costs and 
excessive profit or fees. 

Recommendations for Executive Action: 

We recommend the Secretary of Defense take the following two actions. 

To mitigate the risks of paying increased costs when using an 
undefinitized contract action, revise DFARS to provide specific 
guidance on how to perform an assessment of any reduced cost risk for 
profit or fee during the undefinitized period for cost-plus-award-fee 
UCAs. 

To ensure DOD officials are able to gain insight into the risk 
assessment that is required to be documented in the contract file and 
the basis for the government's profit or fee negotiation objective, 
redesign the weighted guidelines worksheet to explicitly show the 
incurred cost calculations and a narrative description of the reason 
for assigning a specific contract-type risk value. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to DOD for review and comment. In 
written comments, DOD concurred with our recommendations and cited 
planned actions to address them. Specifically, DOD plans to revise 
either the DFARS regulations or its corresponding Procedures, 
Guidance, and Instruction to provide specific guidance on how to 
perform an assessment of any reduced cost risk for profit or fee 
during the undefinitized period for cost-plus-award-fee UCAs. In 
addition, the department plans to redesign the weighted guidelines 
worksheet to explicitly identify the incurred cost calculations and 
justification for the assigned contract-type risk value. The draft 
report also contained a recommendation for DOD to clarify that 
weighted guideline worksheets are to be submitted with the semi-annual 
UCA report submission for all definitized UCAs which equal or exceed 
$100 million. In its written comments, DOD informed us on December 23, 
2009 they revised the DFARS Procedure, Guidance, and Instruction 
217.7405 to require military departments and defense agencies to 
submit, in conjunction with their semi-annual UCA reports, weighted 
guideline worksheets for each definitized UCA with a value of $100 
million or more. Because of DOD's action on this recommendation, we 
have removed it from the report. In addition, DOD provided technical 
comments, which we incorporated as appropriate. The department's 
comments are included in their entirety in appendix IV. 

We are sending copies of this report to the Secretary of Defense; the 
Secretaries of the Air Force, Army, and Navy; the Administrator of the 
Office of Federal Procurement Policy; and interested congressional 
committees. In addition, the report will be made available at no 
charge on GAO's Web site at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions concerning this report, please 
contact me at (202) 512-4841. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. GAO staff who made major contributions to this 
report are listed in appendix V. 

Signed by: 

John P. Hutton: 
Director Acquisition and Sourcing Management: 

List of Committees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable John McCain: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Daniel K. Inouye: 
Chairman: 
The Honorable Thad Cochran: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
United States Senate: 

The Honorable Ike Skelton:
Chairman:
The Honorable Howard P. "Buck" McKeon:
Ranking Member:
Committee on Armed Services:
House of Representatives: 

The Honorable John P. Murtha:
Chairman:
The Honorable C.W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives: 

[End of section] 

Appendix I: Scope and Methodology: 

To identify and assess the actions the Department of Defense (DOD) has 
taken to improve departmental insight into and oversight of 
undefinitized contract actions (UCA), we interviewed senior DOD and 
service acquisition policy officials as well as local officials at the 
selected commands to identify new policies and guidance that would 
affect the amount of insight senior DOD officials have. We reviewed 
the August 2008 Defense Procurement and Acquisition Policy memorandum 
along with the updated October 2009 guidance, which provided 
additional Office of the Secretary of Defense (OSD) policy and 
guidance for UCAs. In addition, we reviewed the relevant sections of 
the Federal Acquisition Regulation and the Defense Federal Acquisition 
Regulation Supplement (DFARS), as well as service-level guidance 
pertaining to the use and management of UCAs. We also reviewed 
relevant proposed changes to DFARS. 

To determine the accuracy of UCA information available to senior 
officials, we analyzed and compared information on UCAs from the 
Federal Procurement Data System-Next Generation (FPDS-NG), DOD's newly 
implemented semi-annual UCA reports, and the local acquisition command-
generated UCA reports. We noted any differences in information among 
the various sources and documented those contract actions which did 
not appear in DOD's semi-annual report, but were recorded in FPDS-NG 
and the local reports. We also discussed these discrepancies with DOD 
officials at both the local level and OSD level to try to understand 
the underlying cause of these differences. 

To identify whether DOD's recent actions have resulted in local 
commands meeting DOD's UCA management standards with regard to 
documenting the basis for negotiating the contractor profit or fee, 
definitization time lines and obligation percentages, and the 
circumstances in which UCAs are used, we conducted a contract file 
review using a randomized list of UCAs from among six military 
commands, one joint service combatant command, and a defense agency. 
In order to choose the locations of the contract file reviews, we 
analyzed UCA information from FPDS-NG for fiscal year 2008. We used 
these data to compile a random selection of UCAs. 

We selected the locations for our UCA file review based on two 
criteria. First, we selected one contracting command from each of the 
three military services (Air Force, Army, and Navy) and one defense 
agency based on its placement within the top 50 percent of total-
dollar value of UCAs issued during fiscal year 2008 as recorded in the 
FPDS-NG system. Second, for comparative purposes, we selected one 
contracting command from each of the three military services (Air 
Force, Army, and Navy) and one defense agency that fell outside of the 
top 50 percent of total-dollar value of UCAs issued during fiscal year 
2008 as recorded in the FPDS-NG system. The contracting commands in 
this second group were then selected using subjective criteria which 
included commands with significant UCA use recommended by the 
services, the command's geographic location, and the command's history 
of UCA use. The specific contracting commands we selected for our 
review were: 

U.S. Army: 

* Tank-automotive and Armaments Command Contracting Center, Warren, 
Michigan: 

* Rock Island Contracting Center, Rock Island, Illinois: 

U.S. Navy: 

* Naval Sea Systems Command, Washington, D.C. 

* Naval Inventory Control Point, Philadelphia, Pennsylvania: 

U.S. Air Force: 

* 303rd Aeronautical Systems Wing (Reconnaissance Systems Wing), 
Wright-Patterson Air Force Base, Ohio: 

* 516th Aeronautical Systems Wing (Mobility Systems Wing), Wright- 
Patterson Air Force Base, Ohio: 

Defense Agencies: 

* Missile Defense Agency, Redstone Arsenal, Alabama: 

* United States Special Operations Command, MacDill Air Force Base, 
Florida: 

Using the data provided by FPDS-NG, we established a population of 
undefinitized contract actions at each location. We identified all 
actions that were either coded in FPDS-NG as letter contracts or other 
undefinitized actions for fiscal year 2008 and the first 5 months of 
fiscal year 2009. We also identified UCAs in FPDS-NG that referenced 
an undefinitized action in the description of the requirement or 
reason for modification fields. Using these methods, we derived a 
random selection of contract actions to review. For some commands we 
verified whether or not a contract action was a UCA through DOD's 
Electronic Document Access database, a Web-based system that provides 
secure online access, storage, and retrieval of contracts and contract 
modifications to authorized users throughout DOD. In addition, the 
selections were also checked for accuracy against lists maintained in 
DOD's semi-annual report as well as those maintained at each local 
command. Over 200 potential UCAs were selected for this review. From 
this selection, we expected to collect data on approximately 10 to 12 
at each command we visited for a total of 80 to 96 UCAs. In the end, 
we collected data on 92 UCAs from which we eliminated 9 and analyzed 
the remaining 83 UCAs valued at a total of $6.1 billion.[Footnote 29] 
Observations made from our review cannot be generalized to the entire 
population of undefinitized contract actions issued by DOD. 

We omitted UCAs for foreign military sales, purchases that did not 
exceed the simplified acquisition threshold, special access programs, 
and initial spares purchases, since these actions are not subject to 
compliance with the definitization requirements we were reviewing. To 
assess the data reliability of FPDS-NG for the purpose of selecting 
locations and identifying UCA contracts, we verified UCA information 
in FPDS-NG with other data systems, such as Electronic Data Access, 
local command UCA reports, the semi-annual DOD reports, and with the 
information recorded in the contract files. On the basis of this, we 
determined that the FPDS-NG data were sufficiently reliable for the 
purposes of this report. 

At each location, we reviewed contract document files and interviewed 
responsible contracting officials. During these interviews we asked 
the contracting officials to explain the rationale for using a UCA and 
the circumstances which led to the decision, as well as the events and 
circumstances involved with definitizing the contract action. We also 
reviewed local command UCA management policies to determine whether 
they were consistent with DOD's management standards and whether these 
policies differed from one command to another. 

To determine whether contracting officers considered and documented 
the basis for their determination of the government's profit or fee 
negotiation objective to reflect any reduced risk to the contractor 
for the undefinitized period, we analyzed the contract file documents, 
including the price negotiation documentation and weighted guidelines 
worksheets. We used this information to determine whether the 
contracting officers considered and adjusted the contract-type risk 
factor using incurred cost and projected cost information. 

To determine whether UCAs were meeting definitization timelines, we 
recorded data from the contract files on when the contract actions 
were awarded and subsequently definitized. We aggregated these data to 
determine the number of contracts definitized in less than 180 days, 
definitized over 180 days, and those still undefinitized over 180 
days. To determine how DOD's policy to limit initial obligations to 
only the amount required for the undefinitized period of work was 
being implemented, we recorded initial obligation amounts from the 
contract files. We analyzed these data to determine how many contract 
actions in our review were obligated at or near the 50 percent limit 
at the time of award. Finally, to determine how and when UCAs were 
being used, we reviewed the contract files and analyzed the types of 
requirements being filled with UCAs and the circumstances behind the 
decision to use this contracting method. We also discussed each case 
with the contracting officers to obtain their rationale for using a 
UCA. 

We conducted this performance audit from March 2009 to January 2010 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Undefinitized Contract Actions Reviewed: 

Army: Rock Island Contracting Center: 

Contract no.: 1. W52P1J07D0010-0015; 
Description of goods or services: LOGCAP[B] program management; 
Award date: 2/13/09; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $30,580,953; 
Obligation amount at award: $15,815,183; 
Total dollar value at definitization: $29,715,055; 
Contract/order pricing type[A]: CPAF. 

Contract no.: 2. W52P1J06D0030-0003 Mod 22; 
Description of goods or services: Support services for left behind 
equipment; 
Award date: 1/28/09; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $49,999,999; 
Obligation amount at award: $25,000,000; 
Total dollar value at definitization: $48,375,366; 
Contract/order pricing type[A]: T&M. 

Contract no.: 3. DAAA0902D0007-0147 Mod 22; 
Description of goods or services: LOGCAP [B] support services in 
Kuwait; 
Award date: 11/30/07; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $184,820,468; 
Obligation amount at award: $19,999,489; 
Total dollar value at definitization: $171,754,437; 
Contract/order pricing type[A]: CPAF. 

Contract no.: 4. DAAA0902D0007-0147 Mod 37; 
Description of goods or services: LOGCAP [B] support services in 
Kuwait; 
Award date: 12/11/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $56,039,142; 
Obligation amount at award: $25,000,000; 
Total dollar value at definitization: $53,712,769; 
Contract/order pricing type[A]: CPAF. 

Contract no.: 5. W52P1J05C0072-Mod 13; 
Description of goods or services: PGU-28-A/B-30A/B and PGU-28A/B 
rounds for Navy and Air Force aircraft; 
Award date: 12/17/07; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $13,632,524; 
Obligation amount at award: $6,816,262; 
Total dollar value at definitization: $13,047,770; 
Contract/order pricing type[A]: FFP. 

Contract no.: 6. W52P1J08C0008; 
Description of goods or services: Qatar-based military personnel 
support services; 
Award date: 4/1/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $42,000,000; 
Obligation amount at award: $7,500,000; 
Total dollar value at definitization: $37,230,387; 
Contract/order pricing type[A]: CPAF. 

Contract no.: 7. W52P1J08C0008 Mod 2; 
Description of goods or services: Qatar-based postal services; 
Award date: 5/22/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $2,718,707; 
Obligation amount at award: $1,359,354; 
Total dollar value at definitization: $1,747,895; 
Contract/order pricing type[A]: FFP. 

Contract no.: 8. DAAA0902D0007-159; 
Description of goods or services: LOGCAP [B] support services; 
Award date: 9/24/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $4,125,682,123; 
Obligation amount at award: $618,589,889; 
Total dollar value at definitization: $4,031,862,544; 
Contract/order pricing type[A]: CPAF. 

Contract no.: 9. W52P1J08C0011; 
Description of goods or services: Tank ammunition for training 
activities; 
Award date: 2/21/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $51,849,900; 
Obligation amount at award: $38,887,425; 
Total dollar value at definitization: $52,549,592; 
Contract/order pricing type[A]: FFP. 

Contract no.: 10. W52P1J08C0010; 
Description of goods or services: Tank ammunition for training 
activities; 
Award date: 3/27/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $57,799,650; 
Obligation amount at award: $28,899,825; 
Total dollar value at definitization: $48,227,200; 
Contract/order pricing type[A]: FFP. 

Contract no.: 11. W52P1J08D0063-0001 Mod 2; 
Description of goods or services: Radioactive and hazardous waste 
disposal for the Navy; 
Award date: 11/14/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $1,288,414; 
Obligation amount at award: $966,311; 
Total dollar value at definitization: $1,162,037; 
Contract/order pricing type[A]: FFP. 

Contract no.: 12. W52P1J08C0003 Mod 3; 
Description of goods or services: Production and support of CH-47F 
helicopter simulators; 
Award date: 2/29/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $37,479,706; 
Obligation amount at award: $28,100,000; 
Total dollar value at definitization: $37,165,112; 
Contract/order pricing type[A]: CPFF. 

Army: TACOM Contracting Center: 

Contract no.: 1. W56HZV08C0114; 
Description of goods or services: Crew protection kits for M915 
Tactical Wheeled Vehicle; 
Award date: 11/29/07; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $57,196,000; 
Obligation amount at award: $28,598,000; 
Total dollar value at definitization: $40,823,152; 
Contract/order pricing type[A]: FFP. 

Contract no.: 2. W56HZV07C0621 Mod 1; 
Description of goods or services: Procure steel armor for Mine 
Resistant Ambush Protected (MRAP) vehicles; 
Award date: 11/1/07; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $21,000,000; 
Obligation amount at award: $10,499,998; 
Total dollar value at definitization: $20,242,872; 
Contract/order pricing type[A]: FFP. 

Contract no.: 3. W56HZV08C0537; 
Description of goods or services: Tires for MRAP vehicles; 
Award date: 7/16/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $4,288,140; 
Obligation amount at award: $2,144,070; 
Total dollar value at definitization: $4,108,536; 
Contract/order pricing type[A]: FFP. 

Contract no.: 4. W56HZV08C0447; 
Description of goods or services: Procure critical spare parts for 
MRAP vehicles; 
Award date: 8/7/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $919,333; 
Obligation amount at award: $450,473; 
Total dollar value at definitization: $838,795; 
Contract/order pricing type[A]: FFP. 

Contract no.: 5. W56HZV05C0313 Mod 13; 
Description of goods or services: Procure Tactical RPG Airbag 
Protection System units for MRAP vehicles; 
Award date: 7/21/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $7,200,000; 
Obligation amount at award: $3,592,800; 
Total dollar value at definitization: $7,104,634; 
Contract/order pricing type[A]: CPFF. 

Contract no.: 6. W56HZV05C0313 Mod 15; 
Description of goods or services: Procure Tactical RPG Airbag 
Protection System units for MRAP vehicles; 
Award date: 9/25/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $3,171,000; 
Obligation amount at award: $1,582,300; 
Total dollar value at definitization: $2,996,116; 
Contract/order pricing type[A]: CPFF. 

Contract no.: 7. 56HZV08D0072-0002; 
Description of goods or services: Track Shoe Assembly for Army Track 
Wheeled vehicle fleet; 
Award date: 7/25/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $35,054,057; 
Obligation amount at award: $17,527,029; 
Total dollar value at definitization: $32,438,336; 
Contract/order pricing type[A]: FFP. 

Contract no.: 8. W56HZV09C0215; 
Description of goods or services: Tires for MRAP vehicles; 
Award date: 12/23/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $1,137,805; 
Obligation amount at award: $568,903; 
Total dollar value at definitization: $1,102,875; 
Contract/order pricing type[A]: FFP. 

Contract no.: 9. W56HZV07C0576 Mod 1; 
Description of goods or services: Retrofit of the Palletized Load 
System and Heavy Equipment Mobility Tactical Truck; 
Award date: 1/8/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $800,000; 
Obligation amount at award: $400,000; 
Total dollar value at definitization: $720,150; 
Contract/order pricing type[A]: FFP. 

Contract no.: 10. W56HZV05G0005-0021 Mod 6; 
Description of goods or services: Electronic jamming systems to 
protect against radio-controlled IEDs; 
Award date: 8/8/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $5,701,088; 
Obligation amount at award: $2,850,544; 
Total dollar value at definitization: $2,506,609; 
Contract/order pricing type[A]: FFP. 

Contract no.: 11. W56HZV08C0138; 
Description of goods or services: Operation of a forward-deployed 
water packaging system; 
Award date: 12/10/07; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $2,447,743; 
Obligation amount at award: $1,223,638; 
Total dollar value at definitization: $2,847,498; 
Contract/order pricing type[A]: FFP. 

Contract no.: 12. DAAE0701CS001 Mod 1488; 
Description of goods or services: Enhanced suspension and improved 
door handles for High Mobility Multipurpose Wheeled Vehicle (HMMWV); 
Award date: 5/12/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $3,052,200; 
Obligation amount at award: $1,526,100; 
Total dollar value at definitization: $3,004,200; 
Contract/order pricing type[A]: FFP. 

Contract no.: 13. DAAE0701CS001 Mod 1489; 
Description of goods or services: Fuel kits for HMMWV; 
Award date: 5/22/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $13,847,000; 
Obligation amount at award: $6,923,500; 
Total dollar value at definitization: $13,802,365; 
Contract/order pricing type[A]: FFP. 

Contract no.: 14. DAAE0701CS001 Mod 1509; 
Description of goods or services: Frag kit for HMMWV; 
Award date: 6/26/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $257,008,930; 
Obligation amount at award: $128,504,465; 
Total dollar value at definitization: $143,105,028; 
Contract/order pricing type[A]: FFP. 

Contract no.: 15. DAAE0701CS001 Mod 1515; 
Description of goods or services: Authorized stockage list parts and 
frag kit for HMMWV; 
Award date: 7/31/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $9,260,602; 
Obligation amount at award: $4,630,301; 
Total dollar value at definitization: $6,778,753; 
Contract/order pricing type[A]: FFP. 

Contract no.: 16. DAAE0701CS001 Mod 1516; 
Description of goods or services: Enhanced armor for HMMWV; 
Award date: 7/30/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $493,796; 
Obligation amount at award: $246,898; 
Total dollar value at definitization: $437,892; 
Contract/order pricing type[A]: FFP. 

Contract no.: 17. AAE0701CS001 Mod 1536; 
Description of goods or services: Armored personnel troop carrier kits 
for HMMWV; 
Award date: 8/6/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $73,714,289; 
Obligation amount at award: $36,857,144; 
Total dollar value at definitization: $71,416,828; 
Contract/order pricing type[A]: FFP. 

Air Force: ASC/303rd AESW: 

Contract no.: 1. FA8620-08-C-4061; 
Description of goods or services: Acquire, pilot, modify, repair, and 
support C-12 aircraft; 
Award date: 8/5/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $119,600,000; 
Obligation amount at award: $35,880,000; 
Total dollar value at definitization: $117,235,013; 
Contract/order pricing type[A]: FFP. 

Contract no.: 2. FA8620-08-C-3004; 
Description of goods or services: Development of Airborne Signals 
Intelligence Payload configuration to meet requirements for Predator 
and Reaper unmanned aircraft; 
Award date: 12/5/07; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $54,900,000; 
Obligation amount at award: $16,678,757; 
Total dollar value at definitization: $71,147,842; 
Contract/order pricing type[A]: CPIF. 

Contract no.: 3. FA-8620-06-G-4033-0006; 
Description of goods or services: Mission operation and logistics 
support for Angel Fire System; 
Award date: 8/29/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $17,102,522; 
Obligation amount at award: $3,459,832; 
Total dollar value at definitization: $17,448,992; 
Contract/order pricing type[A]: CPFF. 

Contract no.: 4. FA8620-04-C-3430 Mod 39; 
Description of goods or services: Upgrade to Common Airborne Modem 
Assembly communication link; 
Award date: 3/31/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $332,748; 
Obligation amount at award: $166,374; 
Total dollar value at definitization: $326,550; 
Contract/order pricing type[A]: FFP/FPIF. 

Contract no.: 5. FA-8620-06-G-4041-0006; 
Description of goods or services: Multi-Spectral Targeting System 
Target Location Accuracy improvements for Predator and Reaper unmanned 
aircraft; 
Award date: 10/17/07; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $3,200,000; 
Obligation amount at award: $3,200,000; 
Total dollar value at definitization: $3,123,206; 
Contract/order pricing type[A]: CPFF. 

Contract no.: 6. FA-8620-06-G-4026-0057; 
Description of goods or services: Procurement and missionization of 3 
aircraft; 
Award date: 12/26/07; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $14,797,440; 
Obligation amount at award: $10,950,000; 
Total dollar value at definitization: $21,171,897; 
Contract/order pricing type[A]: FFP. 

Contract no.: 7. FA8620-05-G3028-0050; 
Description of goods or services: Procurement of Reaper unmanned 
aircraft; 
Award date: 11/26/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $115,158,656; 
Obligation amount at award: $52,927,284; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: FFP. 

Contract no.: 8. FA8620-05-G3028-0036; 
Description of goods or services: Ground Control Stations and other 
related equipment for Predator and Reaper unmanned aircraft; 
Award date: 10/30/07; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $59,544,953; 
Obligation amount at award: $59,544,953; 
Total dollar value at definitization: $53,444,927; 
Contract/order pricing type[A]: CPFF/FFP. 

Contract no.: 9. FA8620-08-C4015; 
Description of goods or services: Provide Remote Piloted Vehicle (RPV) 
Pilots and Sensor Operators for training exercises; 
Award date: 12/21/07; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $5,031,654; 
Obligation amount at award: $2,515,827; 
Total dollar value at definitization: $5,031,654; 
Contract/order pricing type[A]: FFP. 

Contract no.: 10. FA8620-06-G4026-0110; 
Description of goods or services: Procure M-28 aircraft for US Special 
Operations Command; 
Award date: 12/23/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $16,380,000; 
Obligation amount at award: $12,121,200; 
Total dollar value at definitization: $16,278,109; 
Contract/order pricing type[A]: FFP. 

Contract no.: 11. FA8620-05-G3028-0035; 
Description of goods or services: Provide Contractor Logistics Support 
for Predator and Reaper unmanned aircraft; 
Award date: 12/21/07; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $63,779,273; 
Obligation amount at award: $47,834,454; 
Total dollar value at definitization: $170,253,578; 
Contract/order pricing type[A]: CPFF/T&M. 

Contract no.: 12. F33657-01-C4600 Mod 249; 
Description of goods or services: Perform durability tests to Global 
Hawk unmanned aircraft; 
Award date: 4/2/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $1,800,000; 
Obligation amount at award: $900,000; 
Total dollar value at definitization: $1,793,330; 
Contract/order pricing type[A]: CPAF. 

Air Force: ASC/516th AESW: 

Contract no.: 1. FA8625-07-C-6473 Mod 3; 
Description of goods or services: Procurement and installation of C-5 
aircraft Large Aircraft Infrared Countermeasures (LAIRCM) kits; 
Award date: 1/14/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $24,839,778; 
Obligation amount at award: $12,419,889; 
Total dollar value at definitization: $16,339,046; 
Contract/order pricing type[A]: FFP/T&M. 

Contract no.: 2. FA8625-06-D-6453-0010; 
Description of goods or services: Guardian Laser Transmittal Assembly; 
Award date: 10/15/07; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $93,239,931; 
Obligation amount at award: $46,619,966; 
Total dollar value at definitization: $83,511,661; 
Contract/order pricing type[A]: FFP. 

Contract no.: 3. FA8614-04-C-2004 Mod 196; 
Description of goods or services: Guardian Laser Transmittal Assembly; 
Award date: 2/22/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $77,000,000; 
Obligation amount at award: $34,650,000; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: CPFF/FFP. 

Contract no.: 4. FA8614-04-C-2004 Mod 245; 
Description of goods or services: Wing Pylon Fairing kits; 
Award date: 6/12/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $16,300,000; 
Obligation amount at award: $8,000,000; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: CPFF/FFP. 

Contract no.: 5. FA8614-04-C-2004 Mod 236; 
Description of goods or services: Aeromedical Stations Litter 
Augmentation System; 
Award date: 3/27/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $13,769,216; 
Obligation amount at award: $6,196,147; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: FFP. 

Contract no.: 6. A8625-04-D-6452-0003 Mod 8; 
Description of goods or services: Replace aircraft flight system to 
include pilot vehicle interface; 
Award date: 11/24/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $5,000,000; 
Obligation amount at award: $1,000,000; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: CPAF. 

Contract no.: 7. FA8625-06-D-6453-0014; 
Description of goods or services: Design, installation, and flight 
test support of LAIRCM pod; 
Award date: 2/22/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $923,071; 
Obligation amount at award: $461,535; 
Total dollar value at definitization: $860,843; 
Contract/order pricing type[A]: T&M. 

Contract no.: 8. F33657-01-D2000-0020 Mod 25; 
Description of goods or services: Develop replacement for the C-17 
aircraft Global Positioning System Inertial Reference Unit; 
Award date: 12/27/07; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $6,979,931; 
Obligation amount at award: $3,489,965; 
Total dollar value at definitization: $4,409,376; 
Contract/order pricing type[A]: CPAF. 

Contract no.: 9. FA8625-05-C6459 Mod 13; 
Description of goods or services: Upgrade current Guardian Laser 
Transmittal Assembly and LAIRCM processor; 
Award date: 2/29/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $2,618,240; 
Obligation amount at award: $602,000; 
Total dollar value at definitization: $2,354,406; 
Contract/order pricing type[A]: CPFF/T&M. 

Contract no.: 10. F33657-98-C0006 Mod 206; 
Description of goods or services: Procure C-5 aircraft Avionics 
Modernization Program kits; 
Award date: 3/14/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $66,935,000; 
Obligation amount at award: $33,467,500; 
Total dollar value at definitization: $58,653,217; 
Contract/order pricing type[A]: FFP. 

Contract no.: 11. FA8625-08-C6481; 
Description of goods or services: Procure C-130 aircraft Avionics 
Modernization Program kits; 
Award date: 9/30/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $27,200,000; 
Obligation amount at award: $7,160,000; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: FFP/T&M/CPIF/CPFF. 

Contract no.: 12. FA8625-06-C6456 Mod 49; 
Description of goods or services: C-130J aircraft contractor support 
equipment; 
Award date: 4/24/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $3,379,105; 
Obligation amount at award: $1,182,687; 
Total dollar value at definitization: $39,070,592; 
Contract/order pricing type[A]: FFP. 

Contract no.: 13. FA8625-06-C6456 Mod 68; 
Description of goods or services: Configure C-130J aircraft into MC-
130J configuration; 
Award date: 12/9/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $56,560,000; 
Obligation amount at award: $19,634,000; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: FFP. 

Navy: NAVICP: 

Contract no.: 1. N0038306G067B-5290; 
Description of goods or services: Truss assembly; 
Award date: 9/23/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $5,113,350; 
Obligation amount at award: $2,556,675; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: FFP. 

Contract no.: 2. FA810405G0003-GJ72; 
Description of goods or services: TF34 engine blades; 
Award date: 5/5/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $1,110,725; 
Obligation amount at award: $833,044; 
Total dollar value at definitization: $1,036,234; 
Contract/order pricing type[A]: FFP. 

Contract no.: 3. N0038305G003H-0013; 
Description of goods or services: Production tooling for F/A-18 Inner 
Wing Panels spares; 
Award date: 9/23/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $4,350,000; 
Obligation amount at award: $2,175,000; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: FFP. 

Contract no.: 4. N0038304D028N-0007; 
Description of goods or services: Engineering study for Spares and 
Repair Parts for H-60 overhaul and repairs; 
Award date: 7/17/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $450,000; 
Obligation amount at award: $225,000; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: CPAF/CPFF. 

Contract no.: 5. N0038305G003H-0012; 
Description of goods or services: Production tooling for F/A-18 Inner 
Wing Panels spares; 
Award date: 9/23/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $3,250,000; 
Obligation amount at award: $1,625,000; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: FFP. 

Contract no.: 6. N0038306D001J-0004 Mod 08; 
Description of goods or services: AESA radar spares for F/A-18 
aircraft; 
Award date: 3/31/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $38,540,436; 
Obligation amount at award: $19,270,218; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: FFP. 

Contract no.: 7. N0038306D001J-0004 Mod 18; 
Description of goods or services: AESA radar repairs for F/A-18 
aircraft; 
Award date: 9/26/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $8,010,880; 
Obligation amount at award: $4,005,440; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: CPFF. 

Contract no.: 8. N0038306D001J-0004 Mod 25; 
Description of goods or services: AESA radar repair lay-in material 
for F/A-18 aircraft; 
Award date: 11/26/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $1,929,649; 
Obligation amount at award: $964,825; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: FFP. 

Contract no.: 9. FA810405G0003-GK27; 
Description of goods or services: T34 engine blades, turbines, and 
rotors; 
Award date: 5/15/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $709,877; 
Obligation amount at award: $532,460; 
Total dollar value at definitization: $633,826; 
Contract/order pricing type[A]: FFP. 

Navy: NAVSEA: 

Contract no.: 1. N0002408C5202; 
Description of goods or services: Procurement of the Cooperative 
Engagement Capability Design Agent sensor netting system for anti-air 
warfare capability; 
Award date: 1/17/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $62,579,000; 
Obligation amount at award: $24,714,360; 
Total dollar value at definitization: $53,967,986; 
Contract/order pricing type[A]: CPFF. 

Contract no.: 2. N0002409C5103; 
Description of goods or services: Evolve and maintain the Aegis Combat 
System (ACS) at the platform level for the Aegis CG-47 and DDG-51 ship 
classes; 
Award date: 1/9/09; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $51,000,000; 
Obligation amount at award: $25,115,346; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: CPFF. 

Contract no.: 3. N0002405C4208 Mod 19; 
Description of goods or services: Design, fabrication, testing and 
documentation for Submarine Decompression Chambers; 
Award date: 12/21/07; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $769,025; 
Obligation amount at award: $384,512; 
Total dollar value at definitization: $1,092,962; 
Contract/order pricing type[A]: CPAF. 

Contract no.: 4. N0002405C4208 Mod 23; 
Description of goods or services: Procure Submarine Rescue System - 
Rescue Capable System spares; 
Award date: 2/28/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $121,134; 
Obligation amount at award: $60,567; 
Total dollar value at definitization: $121,134; 
Contract/order pricing type[A]: CPAF. 

Contract no.: 5. N0002409C5101; 
Description of goods or services: Multi-Mission Signal Processor, 
Ballistic Missile Defense equipment, and Aegis Weapon System hardware 
upgrades; 
Award date: 2/9/09; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $78,623,236; 
Obligation amount at award: $38,918,503; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: CPIF/CPFF/FFP. 

Contract no.: 6. N0002408C5122; 
Description of goods or services: Procurement of software, 
maintenance, equipment, and documentation necessary to support the 
Ship Self Defense System; 
Award date: 9/30/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $8,322,695; 
Obligation amount at award: $4,161,347; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: CPFF. 

Contract no.: 7. N0002407D5222 Mod 4; 
Description of goods or services: Enhancements for the Common Display 
Systems System; 
Award date: 10/22/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $2,820,097; 
Obligation amount at award: $1,410,048; 
Total dollar value at definitization: $2,271,907; 
Contract/order pricing type[A]: CPAF. 

Contract no.: 8. N0002409C5100; 
Description of goods or services: Ship Self Defense System kits to 
support aircraft carrier and amphibious ship modernization efforts; 
Award date: 12/23/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $14,909,781; 
Obligation amount at award: $7,084,666; 
Total dollar value at definitization: $13,303,184; 
Contract/order pricing type[A]: FFP. 

Contract no.: 9. N0002408C5203 Mod 1; 
Description of goods or services: Procurement of Compact Solid State 
Antennas for the Cooperative Engagement Capability subsystem of both 
the USMC Composite Tracking Network and the US Army Joint Land Attack 
Cruise Missile Defense Elevated Netted Sensor System; 
Award date: 11/26/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $4,070,000; 
Obligation amount at award: $2,035,000; 
Total dollar value at definitization: $4,058,660; 
Contract/order pricing type[A]: FFP. 

U.S. Special Operations Command: 

Contract no.: 1. H9222209C0003; 
Description of goods or services: Procure Hatch Lighting Orientation 
systems for the RG31 and RG33 Armored Fighting Vehicles; 
Award date: 10/31/08; 
Definitization status: Undefinitized beyond 180 days; 
Not-to-exceed amount: $9,350,750; 
Obligation amount at award: $3,282,598; 
Total dollar value at definitization: N/A; 
Contract/order pricing type[A]: FFP. 

Contract no.: 2. H9222208C0034; 
Description of goods or services: Procure Remote Weapon Station 
installation kits; 
Award date: 9/5/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $4,303,797; 
Obligation amount at award: $1,300,000; 
Total dollar value at definitization: $3,049,898; 
Contract/order pricing type[A]: FFP. 

Contract no.: 3. H9222208C0028; 
Description of goods or services: Stealth Reconnaissance Assault 
Transport System vehicles; 
Award date: 8/26/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $5,462,484; 
Obligation amount at award: $2,458,118; 
Total dollar value at definitization: $4,624,974; 
Contract/order pricing type[A]: FFP. 

Contract no.: 4. H9222207D0015-0014; 
Description of goods or services: Procure Psychological Operations 
Print System - Light, along with spares and training; 
Award date: 9/5/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $7,508,394; 
Obligation amount at award: $5,631,295; 
Total dollar value at definitization: $7,449,873; 
Contract/order pricing type[A]: FFP. 

Contract no.: 5. H9222208C0022; 
Description of goods or services: Unmanned Aircraft System Information 
Gathering, Target Surveillance, and Reconnaissance Services; 
Award date: 4/14/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $8,890,000; 
Obligation amount at award: $4,445,000; 
Total dollar value at definitization: $22,853,974; 
Contract/order pricing type[A]: FFP. 

Contract no.: 6. H9222207D0015-0013; 
Description of goods or services: Procure Psychological Operations 
Print System - Light, along with spares and training; 
Award date: 7/3/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $4,110,182; 
Obligation amount at award: $3,082,637; 
Total dollar value at definitization: $4,052,534; 
Contract/order pricing type[A]: FFP. 

Missile Defense Agency: 

Contract no.: 1. HQ000603C0047 Mod 112; 
Description of goods or services: Common X-Band Radar Software for 
Ballistic Missile Defense System; 
Award date: 10/9/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $14,000,000; 
Obligation amount at award: $14,000,000; 
Total dollar value at definitization: $35,340,206; 
Contract/order pricing type[A]: CPAF. 

Contract no.: 2. HQ000604C0004 Mod 61; 
Description of goods or services: Provide support for Ballistic 
Missile Defense System Requirements Review; 
Award date: 2/29/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $24,000,000; 
Obligation amount at award: $10,000,000; 
Total dollar value at definitization: $22,849,959; 
Contract/order pricing type[A]: CPFF. 

Contract no.: 3. HQ014707C0196 Mod 6; 
Description of goods or services: Configuration changes to Canister 
Kill Vehicle for the Terminal High Altitude Area Defense program; 
Award date: 4/16/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $2,500,000; 
Obligation amount at award: $1,250,000; 
Total dollar value at definitization: $1,668,779; 
Contract/order pricing type[A]: CPAF/CPIF. 

Contract no.: 4. HQ014708C0001; 
Description of goods or services: Security services for the Sea-Based 
X-Band radar program; 
Award date: 3/14/08; 
Definitization status: Definitized beyond 180 days; 
Not-to-exceed amount: $5,000,000; 
Obligation amount at award: $2,450,000; 
Total dollar value at definitization: $6,542,887; 
Contract/order pricing type[A]: CPFF. 

Contract no.: 5. HQ014709C0008; 
Description of goods or services: Bridge contract for the development 
of the Ground-based Midcourse Defense system; 
Award date: 12/30/08; 
Definitization status: Definitized within 180 days; 
Not-to-exceed amount: $397,800,000; 
Obligation amount at award: $175,000,000; 
Total dollar value at definitization: $325,308,538; 
Contract/order pricing type[A]: CPFF/CPAF. 

Total: 
Not-to-exceed amount: $6,786,160,580; 
Obligation amount at award: $1,845,093,925; 
Total dollar value at definitization: $6,073,506,557. 

Source: GAO analysis of DOD contract files. 

[A] CPAF - Cost plus award fee: 

CPFF - Cost plus fixed fee: 

CPIF - Cost plus incentive fee: 

FFP - Firm fixed price: 

FPIF - Firm fixed price incentive fee: 

T&M - Time-and-Materials: 

[B] The Logistics Civil Augmentation Program (LOGCAP) is a program of 
the U.S. Army to use civilian contractors to provide the Army with an 
additional means to adequately support the current and programmed 
force by performing selected services in wartime and other operations. 

[End of table] 

[End of section] 

Appendix III: Information for UCAs Omitted from DOD's April 2009 Semi- 
Annual Report: 

TACOM Contracting Center: 

No.: 1; 
Contract number: DAAE0701CS001 Mod 1489; 
Description of goods or services: Fuel Kits for HMMWV; 
Not-to-exceed amount: $13,847,000; 
Award date: 5/22/2008. 

No.: 2; 
Contract number: DAAE0701CS001 Mod 1509; 
Description of goods or services: Frag Kit for HMMWV; 
Not-to-exceed amount: $257,008,930; 
Award date: 6/26/2008. 

No.: 3; 
Contract number: DAAE0701CS001 Mod 1515; 
Description of goods or services: Authorized Stockage List Parts and 
Frag Kit for HMMWV; 
Not-to-exceed amount: $9,260,602; 
Award date: 7/31/2008. 

No.: 4; 
Contract number: W56HZV05G0005-0021; 
Description of goods or services: Electronic Jamming Systems to 
Protect against Radio-Controlled IEDs; 
Not-to-exceed amount: $5,701,088; 
Award date: 8/8/2008. 

NAVSEA;: 

No.: 5; 
Contract number: N0002409C5103; 
Description of goods or services: Evolve and Maintain the Aegis Combat 
System at the Platform Level for the Aegis CG-47 and DDG-51 Ship 
Classes; 
Not-to-exceed amount: $51,000,000; 
Award date: 1/9/2009. 

No.: 6; 
Contract number: N0002409C5101; 
Description of goods or services: Multi-Mission Signal Processor, 
Ballistic Missile Defense Equipment, and Aegis Weapon System Hardware 
Upgrades; 
Not-to-exceed amount: $78,623,236; 
Award date: 2/9/2009. 

No.: 7; 
Contract number: N0002408C5122; 
Description of goods or services: Procurement of Software, 
Maintenance, Equipment, and Documentation Necessary to Support the 
Ship Self Defense System; 
Not-to-exceed amount: $8,322,695; 
Award date: 9/30/2008. 

No.: 8; 
Contract number: N0002409C5100; 
Description of goods or services: Ship Self Defense System Kits to 
Support Aircraft Carrier and Amphibious Ship Modernization Efforts; 
Not-to-exceed amount: $14,909,781; 
Award date: 12/23/2008. 

Source: GAO analysis of DOD data. 

[End of table] 

[End of section] 

Appendix IV: Comments from the Department of Defense: 

Office Of The Under Secretary Of Defense: 
Acquisition, Technology	And Logistics: 
3000 Defense Pentagon: 
Washington, DC 20301-3000: 

January 27, 2010: 
	
Mr. John Hutton: 
Director, Acquisition and Sourcing Management: 
U.S. Government Accountability Office: 	
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Hutton: 

This is the Department of Defense (DoD) response to the GAO Draft 
Report, GAO-10-299, "Defense Contracting: DoD Has Enhanced Insight 
into Undefinitized Contract Action Use, but Management at Local 
Commands Needs Improvement," dated December 29, 2009 (GAO Code 
120819). Detailed comments on the report recommendations are enclosed. 

We appreciate GAO's assessment of our progress in adopting and executing
policies and procedures to better manage the Department's use of 
undefinitized contract actions (UCAs). As your report indicates, the 
actions we have taken in the past 18 months have resulted in enhanced 
insight and improved oversight of UCAs. In the coming year, we will 
build upon this foundation to ensure that when UCAs are used, they are 
used properly. 

Finally, in reviewing the draft, we identified technical comments to 
call to your attention. We have provided informal feedback to your 
staff on these technical points of clarification. 

Sincerely, 

Signed by: 

Shay D. Assad: 
Director, Defense Procurement and Acquisition Policy: 

Enclosure: As stated: 

[End of letter] 

GAO Draft Report Dated December 29, 2009: 
GAO-10-299 (GAO CODE 120819): 

"Defense Contracting: DoD Has Enhanced Insight Into Undefinitized 
Contract Action Use, But Management At Local Commands Needs 
Improvement" 
Department Of Defense Comments To The GAO Recommendations: 

Recommendation 1: The GAO recommends that the Secretary of Defense 
revise the Defense Federal Acquisition Regulation Supplement to 
provide specific guidance regarding how to perform an assessment of 
any reduced cost risk for profit or fee during the undefinitized 
period for cost-plus-award-fee undefinitized contract actions (UCAs). 

DoD Response: Concur. The Department will revise the Defense Federal 
Acquisition Regulation Supplement (DFARS) or the associated DFARS 
Procedures, Guidance and Instruction (PGI) to provide specific 
guidance regarding how to perform an assessment of any reduced cost 
risk for profit or fee during the undefinitized period for cost-plus-
award-fee UCAs. 

Recommendation 2: The GAO recommends that the Secretary of Defense 
redesign the weighted guidelines worksheet to explicitly show the 
incurred cost calculations and a narrative description of the reason 
for assigning a specific contract type risk value. 

DoD Response: Concur. The Department will redesign the weighted 
guidelines worksheet to explicitly show the incurred cost calculations 
and a narrative description of the reason for assigning a specific 
contract type risk value. 

Recommendation 3: The GAO recommends that the Secretary of Defense 
clarify in guidance the requirement that DoD components are to submit 
the weighted guidelines worksheets for all definitized UCAs which 
equal or exceed $100 million to the Office of the Under Secretary of 
Defense (Acquisition, Technology and Logistics) Defense
Procurement and Acquisition Policy Office along with their semiannual 
UCA report submissions. 

DoD Response: Concur. On December 23, 2009, the Department revised 
DFARS PGI 217.7405 to require military departments and defense 
agencies submit, in conjunction with their semi-annual reports, a copy 
of the record of weighted guidelines for each definitized UCA with a 
value of $100 million or more. The Department considers this 
recommendation to be complete. 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

John P. Hutton, (202) 512-4841, huttonj@gao.gov: 

Acknowledgments: 

In addition to the individual named above, key contributors to this 
report were Penny Berrier Augustine, Assistant Director; Megan Hill; 
Rob Miller; Brian Smith; J. Andrew Walker; Julia Kennon; John Krump; 
Ken Patton; and Bob Swierczek. 

[End of section] 

Footnotes: 

[1] A definitized contract action is one in which all conditions and 
terms are agreed to by the parties to the contract at the time of 
contract award. 

[2] Defense Federal Acquisition Regulation Supplement (DFARS) 217.7404-
3(a) (1) and (2). Under the Federal Acquisition Regulation (FAR) 
16.603-2(c)(3), letter contracts are to be definitized before 180 days 
or before 40 percent of the work is completed. DOD has proposed an 
amendment to the Defense Federal Acquisition Regulation Supplement 
(DFARS) (Case 2007-D011) to clarify that DOD letter contracts will be 
definitized using the DFARS procedures (before 180 days or prior to 50 
percent or more of the not-to-exceed amount is obligated) applicable 
to all other undefinitized contract actions. The proposed rule was 
still pending as of January 21, 2010. 

[3] At the time of this analysis, fiscal year 2008 was the most 
current year for which information was available. $18 billion is the 
total not-to-exceed amount for the reported undefinitized contract 
actions, exceeding the $5 million reporting threshold, during fiscal 
year 2008 and represents the highest value of obligations the 
government may have to fund for those contract actions once they are 
definitized. DOD finalized its October 2009 report December 22, 2009. 

[4] GAO, Defense Contracting: Use of Undefinitized Contract Actions 
Understated and Definitization Time Frames Often Not Met, [hyperlink, 
http://www.gao.gov/products/GAO-07-559] (Washington, D.C.: June 19, 
2007). 

[5] Pub. L. No. 110-181, § 809, 122 Stat. 217 (2008). 

[6] Management Oversight of Undefinitized Contract Actions memorandum 
from the Director, Office of Defense Procurement and Acquisition 
Policy (Aug. 29, 2008). 

[7] The Federal Procurement Data System-Next Generation is a 
comprehensive, Web-based tool and database which functions as a 
clearinghouse of information for all of DOD's contract actions, 
including UCAs, exceeding the micropurchase threshold, which in most 
cases is $3,000. 

[8] DOD's Electronic Data Access is a Web-based system that provides 
secure online access, storage, and retrieval of contracts and contract 
modifications to authorized users throughout DOD. 

[9] GAO, High-Risk Series: An Update, GAO-09-271 (Washington, D.C.: 
January 2009). 

[10] DOD's reported obligations in fiscal year 2009 reflected an 
approximately $13.9 billion adjustment to correct an error made in 
fiscal year 2008. The $384 billion we report accounts for the 
correction and reflects DOD's total fiscal year 2009 obligations. 

[11] [hyperlink, http://www.gao.gov/products/GAO-07-559] and 
Department of Defense, Office of the Inspector General, Audit Report: 
Undefinitized Contract Actions. Report Number D-2004-112, Arlington, 
Va. (Aug. 30, 2004). 

[12] [hyperlink, http://www.gao.gov/products/GAO-07-559], 6. 

[13] DFARS 217.7404-6. 

[14] The FAR requires letter contracts be definitized within 180 days 
after the award date or before 40 percent of the work is complete, 
whichever occurs first. See FAR 16.603(2)(c)(3). 

[15] For purposes of this report, an unpriced change order is a 
unilateral, within scope order on which the parties have not yet 
reached agreement on an equitable adjustment. It includes change 
orders, administrative changes, funding modifications, or any other 
contract modifications that are within the scope and under the terms 
of the contract, e.g., engineering change proposals, and value 
engineering change proposals. DFARS 217.7401. 

[16] GAO, Defense Acquisitions: Further Actions Needed to Address 
Weaknesses in DOD's Management of Professional and Management Support 
Contracts, [hyperlink, http://www.gao.gov/products/GAO-10-39] 
(Washington, D.C.: Nov. 20, 2009). 

[17] For more specific information on the UCAs omitted from the April 
2009 semi-annual report see appendix III. 

[18] Documentation of the government's proposed profit or fee is 
typically found in the contract file's price negotiation memorandum 
and weighted guideline worksheet. The price negotiation memorandum 
details the negotiations between the government and the contractor to 
reach final terms of definitization and typically includes the 
government's objective, summaries of the contractor's proposals, and 
the profit or fee negotiated. 

[19] DOD may obligate up to 50 percent immediately at award and up to 
75 percent upon receipt of a qualifying proposal from the contractor. 
DFARS 217.7404-4. According to DOD policy, contracting officers should 
also limit obligating the maximum permissible funding at the time of 
the award to discourage extended periods of performance prior to 
definitization. DOD may waive limitations on obligations if the head 
of the agency determines a waiver is necessary to support a 
contingency, humanitarian, or peacekeeping operation. DFARS 217.7404-
5(b). 

[20] Seventeen of the 83 UCAs we selected were not definitized or 
government negotiation objectives had not been prepared before or 
during our review. Therefore, 66 UCAs should have had a weighted 
guidelines worksheet or a risk assessment in the contract file, 
according to DOD regulations. This number includes the 12 cost-plus- 
award-fee contracts which, although not required to use a weighted 
guidelines worksheet, were still required to consider any reduced risk 
borne by the contractor during the undefinitized period and document 
this risk assessment in the contract file. 

[21] 216.405-2, procedures, guidance, and instruction to DFARS 216.405-
2 and DFARS 217.7404-6. 

[22] DFARS 217.7404-6. 

[23] DFARS 215.404-71-3(c). 

[24] DFARS 215.404-71-3(d)(2). 

[25] [hyperlink, http://www.gao.gov/products/GAO-07-559], 12. 

[26] DFARS 217.7404-4. 

[27] [hyperlink, http://www.gao.gov/products/GAO-07-559], 16. 

[28] Fifteen of the 17 contract actions were awarded before the 
Aeronautical Systems Center's guidance that provided additional 
instructions and reemphasized DFARS limitations on obligation amounts 
at award. In two cases, the Head of Contracting Activity approved a 
waiver allowing for obligating of 100 percent at award for Operation 
Iraqi Freedom /Operation Enduring Freedom requirements. 

[29] Eight UCAs at the Naval Inventory Control Point were removed from 
our analysis because they were used to purchase initial spares. One 
UCA at the Rock Island Contracting Center was removed because we found 
that it was the responsibility of the TACOM Contracting Center and 
should not have been included in our review of UCAs at Rock Island. 
Additionally, at the TACOM Contracting Center and Naval Inventory 
Control Point locations, we reviewed a total of seven UCAs that as of 
February 2009 had been transferred to the Defense Logistics Agency as 
part of the latest Base Realignment and Closure process. 

[End of section] 

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